Birkenstock stayed in the family of its namesake cobbler from 1774 until recently, when it was bought by L Catterton in a multibillion-euro deal. But CEO Oliver Reichert says it’s a good fit that will leave the company’s soul – and soles – intact.
For many companies, the pandemic presented a moment in which to reconsider business strategies. But not at Birkenstock. The German footwear brand simply continued to expand in line with the double-digit growth rate that ceo Oliver Reichert has been driving since he stepped into the role in 2012. The numbers are undoubtedly impressive and so too is the company’s history. At some 247 years old, Birkenstock has grown from a humble cobbler’s workshop in rural Germany into an international purveyor of supportive footbeds. Today it’s the world’s best-known sandal brand and pairs are sported by everyone from Aussie beach bums to Seoul street-style icons.
While many people associate the company with its most famous models – the Arizona, the Madrid or the toe-enclosing Boston – these make up only a fraction of its output. From waterproof slip-ons for chefs to orthopaedic-inspired numbers and a range of spine-supporting children’s shoes, the inventory is massive, with every pair still made in Germany. In most cases, what links its sandals is a cork-latex footbed that Reichert says provides an experience “as close to being barefoot as possible”.
When Reichert became ceo he was the first person outside the Birkenstock family to run it. And this year the German brand made its most radical move yet. After almost 250 years operating as a family company, it was acquired for a reported $4.8bn (€4bn) by private equity firm L Catterton – under whose umbrella sits brands such as South Korean eyewear specialist Gentle Monster and Japanese retail district Ginza Six – with support from Financière Agache, a holding company run by lvmh ceo Bernard Arnault. As this new chapter unfolds, monocle sits down with Reichert for his first major interview following the acquisition, at his executive office in Munich, to hear more.
What will the injection of capital from L Catterton help you achieve?
Our focus remains on organic growth. I’m not going on an acquisition trail and buying up other companies, which does happen in the broader fashion industry. We are simply going to continue to push growth at a two-digit rate every year. Which is not easy; we have sold out of products every year since I took over the company. So we’re looking into supply-chain issues: how do we address the demand? How do we allocate products to the right markets?
The next step is to work with our collection, which includes many items that you don’t see in the main segments of the market: therapeutic shoes, children’s shoes and home shoes, for example. We have so many categories within our range that could generate the same total amount of business as we are doing now on their own. This company is filled with sleeping giants, so growth will come from waking them up. Right now I don’t have the people or the capacity to lift them up into the daylight and let their seeds grow. But we are investing in making this happen.
Some people in the fashion industry might find it interesting to know that you’re investing in more capacity to continue manufacturing Birkenstock in Germany, including a new production site, rather than looking offshore.
As a German, I can say that we are very precise about the way we execute things. Sometimes too precise; our perfectionism can become a monster that you have to wrestle down. But this is why it is so important that all of our production operations are in Germany. It is essential for us in order to control the quality and to encourage this kind of perfectionist culture.
The new site will open in Germany later this year with about 300 people and quickly scale to support 1,500 staff. Of course, it is often difficult to find the right kind of workers for manufacturing but in the east of Germany the transformation of the automotive industry has put many people out of work. We can now provide employment for them. I have also seen a strong movement of young families moving back from big cities to the countryside, so I’m not too worried about finding properly skilled and trained people out there.
Do the new owners at L Catterton share this vision?
When the new shareholders came in and took over parts of the company, people outside were saying things along the lines of, “OK, now they will move production to China or India.”
If these people knew me well, however, they would know that, as long as I’m here, we will never dilute the brand equity. We will never dilute quality nor functionality. No way. And the conversation about continuing our manufacturing in Germany was an easy one to have with the investors because I chose them.
And why did you choose L Catterton?
Because it is the best investor for growth. There are financial guys out there who will promise you everything but in the end they are just thinking about their exit strategy. In this case I had such a huge commitment from its team. I was able to talk to both Michael Chu [co-chief executive officer of L Catterton] and Nikhil Thukral [its managing partner] in a very honest and straightforward way. They quickly learned that I am like an old bear and you cannot break me.
I’m a very straight person. I was able to say to them, “This is how it is, like it or not. Are you all in, yes or no?” And they said ‘yes’ because they love the brand, our attitude, our energy, how are we moving forward and how honest we are. And they love how successful we are. Maybe this is what they love the most.
A strong brand DNA is at the core of Birkenstock; how valuable is this in the fashion industry?
We’re a dinosaur. If you were to write down the history of Birkenstock on a piece of paper as a business plan and take it to a bank to ask for support they would tell you that it would never work. Yet somehow we are still living and we are very successful.
What makes us very attractive is our very clear, focused business mentality. We are not saving the world; we are making a sandal. But this is what we have poured our energy into for almost 250 years. It has all come out of this very German Birkenstock family, who have spent centuries thinking about every millimetre of this shoe. That was their real purpose.
Yet Birkenstock hasn’t felt as though it has closed itself off from the rest of the world. The brand has increasingly become known for fashion collaborations with the likes of Jil Sander, Rick Owens and, of course, Monocle. Why?
First of all, the collaborations are not big for us as a business. They are really more about creative marketing, public relations and contact with the outside world. We make sure that there’s always a small door open to let the creative energy in. It’s there to help us question ourselves, not only in terms of look and feel but also in terms of materials, sustainability and functionality as well.
You find interesting things out this way. For example, we might work with a brand in Asia that tells us that Asian people tend to have shorter toes and broader feet, so we have to rethink the footbed for that market. We gain plenty of input through these kinds of conversations but we are always committed to our three pillars: quality, functionality and the traditional.
These three pillars are attributes that brands the world over are keen to subscribe to, so you must have many companies wanting to work with you to elevate their image through a collaboration. Have you had to become a careful curator to manage these tie-ups correctly?
Yes, we’re something of a blank canvas. We invite people in and paint a picture together. As I said, this is a small part of our business; if we were only doing this for the money, we’d end up doing strange things. I don’t want to bring specific brand names up but we cancelled some of the commercially driven projects because of this. We didn’t cancel them because we don’t need the money, we did it because we don’t need attention in the wrong places. It’s like music: I don’t want to be in the pop charts; I just want to make good songs. It’s not about finding a formula to constantly be in the top 10 and keep doing the same thing. That’s boring.
It seems as though songs about sustainability are trending well in your industry’s charts but a lot of this is not entirely sincere. You have an argument on your side for longevity of the product but you’re also working with leather. People are increasingly wanting to know about what goes into a product. How are you dealing with this?
It’s true that young target groups in particular really do care about the environment. But for us, we find the broader discussion around sustainability and our involvement in it a bit strange. For example, five years ago we won a Peta award for animal-friendly fashion for a vegan model of our Madrid sandal. But the reality is that more broadly we do work with a lot of leather. My feeling is that if the people decide that they only want vegan products from Birkenstock, I’m ready to do it. But I don’t want to try to convince people to go in this direction; it’s their right to choose.
As a company, our operations are sustainable; Germany has pretty strict rules about manufacturing correctly. But in this broader conversation we’re having at the moment, I would like to know how you characterise sustainability? Our grandmothers are sustainable, because they don’t throw away plastic bags; they fold them up, store them in cupboards and reuse them. It’s not a new idea; it’s old-school. But now grandma will get criticised for using plastic bags. I think – and I hope – that the conversation will rebalance itself, because at the moment it’s a bit too much. For us it’s more about doing our best and being as transparent as possible but never faking it. Greenwashing is a big problem that is running rampant in our industry. It’s embarrassing because it’s being executed at the highest level by massive brands in a very disingenuous way.
Finally, if we do want to state our case on this, you can just look at how our customers use our products. Some wear the same Birkenstock sandals for 20 years and still don’t throw them out. The best way to be sustainable is not to consume as much.